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Lord Grantchester: My Lords, I am grateful to the noble Lord, Lord King, for introducing this debate today on the independent delivery agency, the Rural Payments Agency. At the outset, I declare my interest—as a Peer sitting on the government Benches—as a dairy farmer in Cheshire and as a director of Dairy Farmers of Britain, a co-operative of some 3,500 dairy farmers. I have also been the
 
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president of the Royal Association of British Dairy Farmers and chairman of the Cheshire branch of the CLA, as well as being a member of the NFU. However, my words today are spoken merely as a dairy farmer.

The Government and the Minister at the time, my noble friend Lord Whitty, are rightfully to be congratulated on the announcement on 12 February 2004 that, as part of widespread and continuing reform of the common agricultural policy, England would introduce the single payment scheme on the dynamic hybrid model. Farmers' payments would be based 90 per cent on historical claims and 10 per cent on the area farmed. Over time, this would change from historical predominance to payments per acre of holding. That was part of the process of changing payments to farmers from being production-based towards being based on environmental and other benefits. Payments cannot be justified on some ever-receding historical production level.

While this system is obviously more complex than the purely historical system introduced by Scotland and Wales, among others, that announcement was now more than two years ago. However, complexity has been compounded by further changes—for example, changes to the definition of who is eligible, what is eligible and what are the requirements with adjustments for hardship and national reserve cases, appeals, treatment of common land and set-aside. One might ask whether it was then wise to overlay IT, office and staff changes. There has not been a settled team working in a settled work environment.

Does that entirely excuse what other noble Lords will be describing today? I believe that most of the problems are consequential on the fact that the mapping process that is obviously required for the area element of the payment has been ineffective. I know that the noble Earl, Lord Erroll, will come up with some interesting theories later concerning that. From my farm, I have received differing maps about every two months or so, each one bearing little relation to the map previously sent to me and no relation to the corrected maps that I return each time. Why should that be, given that I had very adequate maps provided under IACS previously?

It is extremely disappointing that this mapping process has not been completed prior to the payment window opening. As I understand it, of some 120,000 applicants, 55,000 have been validated for payment—although I understand that some of these are still incorrect—leaving 65,000 invalidated and with notification of entitlements unreliable. My noble friend cannot be held responsible for the operation of this delivery agency. However, he will be anxious that its performance will be reflected in people's assessment of the Government and their administration. How can my noble friend be told and repeat on 2 February that the bulk of payments would be completed by the end of March and then, some mere six weeks later, on 16 March, be told that only 7 per cent of claims have been paid with only two weeks to go?
 
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Can I tempt my noble friend with some helpful suggestions? It would help customer relations enormously if the agency's attention could change from overindulgent procedures to avoid disallowance and from focusing on the potential fine for failure to implement the EU regulation by June. Instead, let us see what can be done to implement partial payments. After all, 90 per cent of claims are on an historical basis. We should change the process to one in which staff operate as case officers for individual claimants rather than undertake the task-based approach. We should allow communications with claimants so that they can understand to some degree where they are, what they can tell their bank managers and what probable outcomes they must plan for. We should state on entitlement statements the calculations used to arrive at an award, so that claimants can follow and check the validity. We should announce that penalties for late filing will be waived so that errors are not needlessly exported into next year's system. Also, we should get the outsourced mapping contractors into the RPA offices to work as a team, eliminating any IT glitches.

No doubt the Minister is seeking deadlines on which he will expect answers to many problems. Will he say what disciplines he has called for to give this House confidence that everything is being done to expedite matters? The lack of funds into the rural economy is resulting in severe stress, anxiety and economic hardship. I understand that some £10 million as interest is being transferred from farmers to the banks. That money is urgently needed to help the transition that we all seek towards the revitalised sector.

The SPS system is not the only source of funds that the RPA processes into the rural economy. I also refer, as far as livestock producers are concerned, to the compensation payments consequential on disease, especially bovine TB. The House debated the Cattle Compensation (England) Order 2006 on Friday 10 February, although regrettably I was unable to be present.

I am aware that one must be extremely careful when venturing into areas that impact directly on one's own affairs outside this House. However, I can assure my noble friend that this system is in need of urgent improvement. Although it may be effective for a large part of the cattle population, 47 cattle categories are inadequate to do justice to the multitude of herds, ages and standards, especially breed improvement programmes undertaken to add independently assessed value to a farmer's herds. Moreover, these breed improvement programmes have as their main feature longevity and welfare implications. This tabular system is based on the auction system whereby a vendor has to rely on what a purchaser is prepared to pay. It entrenches the system whereby farmers must accept what is offered for their produce, be it cattle, milk, cheese, beef and so on. The tabular system fails to take into account private sales where the vendor can, to some extent, name his price. It also fails to recognise that many herd-improving cattle are not traded at all, as they are retained to produce and pass on genetic superiority to their offspring.
 
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Holstein UK, the registration body for pedigree black and white cattle, which also undertakes registration programmes for six dairy breeds and one beef breed, has been working with the National Audit Office to authenticate price banding according to independently set breed improvement programmes. Information is independently verified by the Centre for Dairy Information. The tabular form is blighting the value of herds, reducing fair comparisons and fair compensation to perhaps the top 20 per cent of cattle and their owners. Genus, a publicly quoted company, is to be congratulated on breeding a bull called Picton Shottle, which has been independently assessed as being internationally superior. His services are much in demand. God forbid, but is he to be valued on the same basis as a herd-bred pedigree bull? I suggest that the NFU should still advise all members to undertake an independent valuation of cattle caught by bovine TB and to attach it to their form, BT1(1/06), on the valuation of bovine animals. We might then be able to follow this up.

I mention that as a further example of resources that are not getting through to rural areas. I could also include diversification grants, set up to encourage new enterprises. My noble friend has direct experience of difficulties that can be encountered if the pace of change is too great. While I applaud the enthusiasm for change shown by my noble friend, perhaps I can tempt him to be aware that these are extremely testing times in the rural economy and that more time may be required to effect a lasting transformation.

1.51 pm

The Countess of Mar: My Lords, I, too, am grateful to the noble Lord, Lord King of Bridgwater, for introducing this very timely debate. I declare my interest as a partner in a small family farm. While we have applied for payments under the single payment scheme—SPS—we are not, thank goodness, in any way dependent on them.

I am deeply dismayed by the complacency displayed by the Minister and his right honourable friend Mrs Beckett to the circumstances of those farmers who are now in dire financial straits because of a series of management failures that were forecast several years ago. I have no doubt that other noble Lords will speak very movingly about the farmers' plight.

Why has this failure occurred? Why is it that nobody seems to have had the courage to tell Ministers that things are going disastrously wrong? As the noble Lord, Lord King, pointed out, even when Ministers were told by the EFRA Select Committee in another place, they insisted that the committee was wrong. Why is it that Ministers were so unaware of what was happening? Were they taking the glossy annual reports, with their glowing record of targets achieved, at their face value? Did they ever ask about targets that were not achieved? Why, when all the alarms were sounding from at least November 2005, and probably much earlier, did Ministers not heed them? Could it be that facing the facts became so repugnant that an ostrich-like mentality set in?
 
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It is not good enough to blame the previous administration, as the Minister did last Monday in his response to the noble Baroness, Lady Shephard of Northwold, when he said,

The blame falls fairly and squarely on the present Government and they must accept that responsibility. It was they who, as the noble Lord admitted, set up the RPA. It has been their policy that has driven the agency and it is they who appointed an apparently incompetent team to run it.

I do not believe I am alone—from what the noble Lord, Lord King, has said, I know I am not—in finding distasteful the Minister's response to the noble Baroness, Lady Byford, despite his kind words to her today. Last Monday, she suggested that the Minister might like to consider his own position, to which he said:

If the RPA were a commercial business, there is no doubt that those responsible for this disaster, whether in the field or at arm's length, would have resigned of their own volition or would have been sacked.

The Minister's right honourable friend Mrs Beckett said in another place last Monday:

the noble Lord, Lord King, has already said this—

This is risible and indicates a total failure by the Secretary of State to question the organisation for which she claims responsibility.

Surely the previous chief executive, Mr Johnston McNeill, must have known what the problems were. Surely the RPA senior management team must have known what was happening. What was the RPA's audit committee, which is tasked with the duty to advise the chief executive,

doing? As, according to his right honourable friend, the Minister has spent not just hours but days working on this over many, many months, why did he not know what was happening?

I am finding it difficult to understand just what the current position is of the former chief executive, Mr Johnston McNeill. The Minister said on Monday that he had been removed from office and that, as far as the Minister knew, he was still in receipt of his salary. I note from the annual report for the year 2004–05, the latest published on the RPA website, that one individual was in receipt of an annual salary of between £225,000 and £230,000. Will the Minister please confirm that this is the salary of the chief executive, and will he please tell the House what that
 
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salary is today? Is the noble Lord able to confirm that interviews are currently being conducted for his replacement? If they are, how is it that no decision has been taken on Mr McNeill's future duties, as the noble Lord told the House on Monday?

What independent assessment is being made of the competence of the chief executive and other members of the Ownership Board and, if they are found to have misled Ministers as to the true state of affairs at the RPA, what are the sanctions? The noble Lord has said that the former or suspended—we do not know—chief executive is entitled to some rights. Will he tell the House what those rights are? How much are they going to cost the taxpayer?

The next question is: how can we retrieve the situation? The noble Lord, Lord Grantchester, has made some very useful suggestions. Although many criticisms have been levelled at staff who must field the telephone calls of justifiably irate farmers, I have always found them to be courteous and as helpful as they can be in the circumstances. It is not their fault that they are inadequately trained and that they may not understand exactly what they are supposed to be doing. Most of them will probably have no experience of agricultural, let alone rural, life. It is my understanding that staff have been moved around according to the exigencies of the service and that a lot of temporary staff have had to be employed. This must mean that they are given little opportunity to be trained, let alone to settle into a task—another point made by the noble Lord, Lord Grantchester. They are the first point of contact for customers of the agency. Anyone who has ever had anything to do with a business that involves dealing directly with customers knows exactly how important it is to have informed and efficient front-line staff.

It is also my understanding that the computer system is far too ambitious for the job that it was designed to carry out. It strikes me that too much has been expected of the whole organisation since its inception. I wonder whether noble Lords realise that the Rural Payments Agency operates 97 different CAP schemes in addition to the single payment scheme. It will almost take a miracle for the vision, details of which are to be found in the RPA strategy for 2004-09, to materialise.

I believe that much of the problem lies with too much policy and not enough management and practicality. It may be laudable that the RPA wants, as it says in its strategy,

What a dream. It seems unlikely that its current structure will allow that to happen. Instead of allowing the RPA to grow naturally, the policy makers seem to have asked it to take on more and more elements when an inadequate management could not say, "Enough is enough". They have failed to ensure that staff are trained and ready to take on the extra work and that they have the tools with which to do it. This seems to be a case where the economies of centralisation are
 
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outweighed by the inefficiencies created by the complexity of the tasks allocated to the organisation. Will the Minister say whether any lessons have been learnt from this experience? He said that a new chief executive or acting chief executive had been parachuted in—not his words, but that was the inference—and I wonder whether he considers the next person on the ladder of command to be a new person, when he has already proved his inadequacy on the board, and whether he is a suitable replacement.

1.59 pm

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